Roughly 95 percent of bitcoin trading is faked by unregulated cryptocurrency exchanges, according to an analysis by an asset firm seeking U.S. Securities and Exchange Commission approval of a bitcoin ETF.
In a presentation made public on Thursday, Bitwise Asset Management cites data from industry source CoinMarketCap that places daily bitcoin trading volume at about $6 billion. Based on an analysis of 81 crypto exchanges over four days in March, Bitwise found that just $273 million could be linked to legitimate trades.
"The real market for bitcoin is significantly smaller, more orderly and more regulated than is commonly understood," Bitwise said in its presentation.
The Wall Street Journal was first to report on Bitwise’s presentation.
Bitwise argues that 71 of 81 cryptocurrency exchanges it analyzed showcased trading patterns that suggested fraudulent activity. The firm said that most of the transactions on these platforms are "either fake volume" or "non-economic wash trading," a term used to describe the simultaneous buying and selling of the same asset.
Conversely, bitcoin trading on platforms subject to some form of regulation, such as Binance, CoinBase and Winklevoss twins-backed Gemini, followed authentic patterns.
The SEC has rejected all efforts to establish a bitcoin ETF so far, including two attempts by the Winklevoss twins, citing concerns about consumer protections and manipulated trading. Like all cryptocurrencies, bitcoin prices have been subject to extreme volatility, rising as high as $19,000 in late 2017 only to plummet below $4,000 in recent months.